Sales & Operations Planning

The constant tension between the sales and operations team in many businesses is almost taken as a given - but the impact of it on business efficiency and profitability is immense and cannot be ignored.

It manifests itself as stock-outs of key products affecting customer service, overstocking - which ties up cash and warehouse space, failed promotions, poor production scheduling, reactive management leading to poor decisions making. The Sales team complain that the Ops team are incompetent; the Ops team complain that the forecast is wrong or the r=promotion wasn't communicated. If this sounds familiar.......

Sales & Operations Planning (S&OP) is a crucial process for companies because it helps align various functions within an organisation to achieve a balance between customer demand and the company's operational capabilities. It provides a structured framework for cross-functional collaboration and decision-making, enabling companies to effectively manage their resources, optimise production, and respond to market changes.  

In essence, Sales & Operations Planning ensures that a company's strategic goals, operational capabilities, and customer demands are in harmony. It's a process that enables companies to navigate dynamic market conditions and achieve long-term success.

Sounds great - but it's difficult to deploy and sustain. It has to have complete buy-in from the most senior levels of the business - but it becomes the way you run your business. It's as much a culture as a business process.

Demand Forecasting is critical to any business - and it's different and it comes before the Sales Forecast. Many organisation issue a Sale Forecast as a cash value which the rest of the business has to interpret into something they can use. The demand forecast will forecast the units to be put through the business, and that is then transformed into a Sales Forecast. If that doesn't meet the budget - then the management team looks out how it can influence demand or pricing to hit the target.

Typical Issues

• Ownership of the forecast is in the wrong department - usually Sales or Finance
• The forecast is based on "gut-feel" with no statistical justification
• Forecasts are usually over-optimistic - we're all familiar with organisations missing targets and forecasts month after month
• A cash value target doesn't define the anticipated demand on a SKU by SKU basis and so is of little benefit for operational planning
• Forecasts are set for a time horizon that is often too short for action to be taken to hit it
• Forecasting is usually done using large, complex spreadsheets, reliant on one owner, susceptible to small errors creating big errors
• Forecast error is not measured and thus no attempt is made to understand why it's there and to reduce it.

How We Can Help

We can establish a competent forecasting methodology which produces a forecast of use to all departments in the organisation and on a timescale that can be achieved. We can establish methods to measure forecast accuracy and bias, showing where the most error is being made and why. We can support the procurement of software solutions that produce forecasts based on historic demand and demand profiles, taking in to account events (promotions, etc.) which can be overlaid with forthcoming events and presented for sign off.

Relevant Experience of the Team

Setting up a Demand Planning team in a multi brand food business. Procurement of forecasting software. Design and deployment  of Sales & Operations Planning process in food manufacturing business. 

 SALES & OPERATIONS PLANNING PROCESS

Introduction

Sales & Operations Planning (S&OP) is a process - one that runs every month throughout the year. It should be the core business process on which every member of the team relies and uses to plan, deploy and measure. 

Conceptually it is very simple. Every month a demand forecast is created for a future month (say 3 months away). That forecast is reviewed and amended by the sales team - they sign off the demand forecast. The forecast is then translated into upstream requirements (suppliers goods, raw materials, ingredients, production  capacity, people) and downstream requirements (warehousing space, transport, people). If the requirements are covered - all well and good; but if one or several requirements cannot be met - then the business has to make decisions to mitigate that. Similarly, if the demand forecast is much lower than budget, there is a risk of over-resourcing, and that too must be mitigated. The final version of the plan is translated into a financial forecast which can then be compared to the budget and previous forecasts. 

Typical Issues

• Poor attendance of key stakeholders at regular meetings
• Team members not preparing materials on time for the meetings
• Sales being lost and no clarity as to why the stock was not available
• Warehouses full of unwanted, old stock. Lack of space for current lines
• Forecasts typically produced as a cash value which is of no use to those managing stock
• Forecasts being amended to meet budget, and then still being missed.
• Blame-game between all members of the organisation

How We Can Help

We can develop a full Sales and Operations Planning process for your business. The process needs to be tailored to be relevant to the business in terms of who is part of the process and on what timescales the process operates. We can work with key stakeholders to develop processes in their area which join up to create the overall process. We develop the timetables by which the S&OP process should run. We educate team members on the relevant skills they need. 

Relevant Experience of The Team

Designing and deploying S&OP processes in a number of businesses in the UK. Procurement of systems to support S&OP processes.